ENTREPRENEURIAL TEAMS

New-Venture team
• New-Venture Team
• Is the group of founders, key employees, and advisors that move a
new venture from an idea to a fully functional firm.
• Usually, the team doesn’t come together all at once. Instead, it is built
as the new firm can afford to hire additional personnel.
• The team also involves more than paid employees.
• Many firms have board of directors, board of advisors, and
professionals on whom they rely for direction and advice.
• Liabilities of Newness
• New ventures have a high propensity to fail.
• The high failure rate is due in part to liabilities of newness, which
refers to the fact that new companies often falter because the people
involved can’t adjust fast enough to their new roles and because the
firm lacks a track record of success.
• Assembling a talented and experienced management team is one path
that firms can take to overcome these limitations.
Separate elements of a new venture team

Key
Employees

Founder or
Lenders and founders Board of
investors Directors
of a
venture

Other
professionals
The founder or founders
• Founder or Founders
The characteristics of the founder or founders of a firm and their early
decisions have a significant impact on the manner in which the new-
venture team takes shape.
• Size of the Founding Team
Studies have shown that 50% to 70% of all new ventures are started by
more than one individual.
Experts disagree about whether new ventures started by a team have an
advantage over those started by a solo entrepreneur.
Advantages and Disadvantages of Starting
a Venture as a Team
• Advantages

i. Teams bring more talent, resources, and ideas to a new venture.

ii. Teams bring a broader deeper network of social and professional
contacts to a new business.
iii. The psychological support that the cofounders of a business can
offer one another can be an important element of a new venture’s
success.
Disadvantages
• Team members may not get along.
• If two, or more people start a firm as “equals,” conflicts can arise when the
firm needs to establish a formal structure and designate one person as the
CEO.
• If the founders have similar areas of expertise, they may duplicate rather
than complement one another.
• Team members can easily disagree in terms of work habits, tolerances for
risks, levels of passion for the business, ideas on how the business should be
run, and similar key issues.
Key Elements of a Successful Founding
Team
• Heterogeneous rather than homogenous teams tend to be more effective.
• This team is starting an educational software company.
• The man on the left is a former teacher, the woman in the
middle is a software engineer, and the man on the right
has a business background.
Preferred Attributes of Solo Entrepreneurs
and Members of a New-Venture Team
• Higher Education
Evidence suggest that important entrepreneurial skills are enhanced
through higher education.

• Prior Entrepreneurial Experience

Founders familiar with the entrepreneurial process are more likely to
avoid costly mistakes than founders without similar experience.
Factors That Contribute to a Founder or
Founders’ Success
• Relevant Industry Experience
Founders with relevant industry experience are more likely to have:

i. Better established professional networks

ii. More applicable marketing and management skills

• Broad social and professional network

Founders with broad social and professional networks have potential
access to additional know-how, capital, and customer referrals.
Recruiting and Selecting Key Employees
• Recruiting Key Employees

Start-ups vary in terms of how quickly they need to add personnel.

In some instances, the founders will work alone for a period of time. In
other instances, employees are hired immediately.
A skills profile is a chart that depicts the most important skills that are
needed and where skills gaps exist in a new firm.
The Roles of the Board of Directors
• Board of Directors
• If a new venture organizes as a corporation, it is legally required to
have a board of directors.
• A board of directors is a panel of individuals who are elected by a
corporation’s shareholders to oversee the management of the firm.
• A board is typically made up of both inside directors and outside
directors.
• An inside director is a person who is also an officer of the firm.
• An outside director is someone who is not employed by the firm.
Cont’d….
• Formal Responsibility of the Board
A board of directors has three formal responsibilities:

i. Appoint the officers of the firm.

ii. Declare dividends.
iii. Oversee the affairs of the corporation.

Frequency of Meetings and Compensation

Most board of directors meet three to four times a year
New venture are more likely to pay their board members in company stock or
ask them to serve on a voluntary basis rather than pay a cash honorarium.
What a Board of Directors Can Do to Help
a Start-Up Get Off to a Good Start
Board of Advisors
• Board of Advisors
i. A board of advisors is a panel of experts who are asked by a firm’s
managers to provide counsel and advice on an ongoing basis.

ii. Unlike a board of directors, an advisory board possesses no legal

responsibility for the firm and gives nonbinding advice.

iii. An advisory board can be established for general purposes or can be

set-up to address a specific issue or need.
Cont’d….
iv. Many people are more willing to serve on a company’s board of
advisors than its board of directors because it requires less time and
there is no potential legal liability involved.

v. Like the members of a board of directors, the members of a

company’s board of advisors provide guidance and lend credibility to
the firm.
Guidelines to Organizing a Board of
Advisors
• Advisors will become disillusioned if they don’t play a meaningful
role in the firm’s development and growth.

• A firm should look for board members who are compatible and
complement one another in terms of experience and expertise.

• When inviting people to serve on its board of advisors, a company

should carefully spell out to the individuals involved the rules in terms
of access to confidential information.
Lenders and Investors
• Lenders and Investors
i. Lenders and investors have a vested interest in the companies they
finance, often causing them to become very involved in helping the firms
they fund.

ii. Like the other non-employee members of a firm’s new venture team,
lenders and investors help new firms by providing guidance and lending
advice.

iii. In addition, a firm’s lenders and investors assume the natural role of
providing financial oversight.
Ways Lenders and Investors Add Value to
an Entrepreneurial Firm
Ways Lenders and Investors Add Value to
an Entrepreneurial Firm
Other Professionals
• Other Professionals
The other professionals that make up a firm’s new-venture team include
attorneys, accountants, and business consultants.

• Business Consultants
A business consultant is an individual who gives professional or expert
advice.
Business consultants fall into two categories: Paid Consultants and
consultants who are available for free or at a reduced rate through a
nonprofit or governmental agency.
How Teams Evolve into a Well-Functioning
Unit?
• How teams evolve into a well-functioning unit:
Every team that finally turns into a well-formed unit goes through four distinct
stages.

• Here is a quick glimpse of the four stages of team development. The steps the
manager needs to take in guiding the team through the stages: (Bruce Tuckman’s
Model, 1965)

Stage 1: The Coming Together Stage

Stage 2: The Falling Out Stage
Stage 3: Settling Down
Stage 4: The High Performing Stage
Stage 1: Coming Together (Forming)
This is the initial phase of team formation. This could refer to a bunch of
people coming together to form an altogether new team, or it could refer to an
existing team which has seen a change in personnel, where new members or a
new manager has joined in. You may consider this stage to be one, where
relationships are being formed.
i. In this stage, as is human nature when people get together for the first
time, they are usually putting together their best foot forward.
ii. They are on their best behavior. They are looking for guidance on how to
move forward together.
iii. Team members experience excitement, anxiety and a lot of nervous
energy that needs to be channeled in the right direction.
• Manager’s role is as under:
i. Define team structure, roles, and responsibilities, team goals and
objectives and expectations.
ii. Manager’s should also look to help foster relationships between
individual team members.
iii. The importance of these actions on the part of the manager cannot be
underestimated.
iv. Failure to perform these tasks leaves the team feeling lost concerning
what is expected of them.
v. This stage lasts for a short time before the team moves to the second
stage.
Stage 2: Falling Out (Storming)
As the time progresses, people’s real selves begin to show.
• The formality diminishes and there are possibilities of face to face outbursts
and frustration being expressed openly.
• In this stage, infighting (disagreement) and conflicts also arise due to
clashes of personality, ideas, opinions, etc.
• Team members often try to show themselves as being one-up on fellow
team members, which further intensifies conflicts.
• Unfulfilled expectations and members’ failure to meet teams’ goals can also
add fuel to the fire.
• If you have seen teams fall apart due to infighting (disagreement) and ego
clashes, then it is because most people cannot negotiate and come on a
common consensus.
• Manager’s role:
i. Initiate conflict management and group sessions to help clear the air.
ii. Manager needs to constantly reiterate the need for individual members to
work in conjunction with others, both in words and in action (rewards
and penalties).

Two things are the key to remember here:

i. The conflicts that come with this stage are part of the natural evolution of
every team.
ii. Manager has to be actively involved in helping the team sort out
differences and function as a closely knit unit.
Stage 3: Settling Down (Norming)
• If a team manages to overcome the second stage, then they reach a stage
that is called settling down.
• In this stage, each team members go through the phase of acceptance of
each other and greater unity in their working.
• A greater sense of comfort and friendliness is seen within the team
members. They discuss opinions and issues openly and congratulate each
other more warmly.
• These developments lead to better productivity and enhanced team
performance. This makes it easier to accomplish team goals and objectives.
• The manager’s role in this stage of the team’s development is to continue
guiding the team to fulfill their fullest potential.
Stage 4: High Performing Stage
(Performing)
• In this stage, members become more receptive to each other’s strengths and
weaknesses and even constructive criticism (positive feedback).
• There is a sense of understanding that the team is one functional unit and
its’ members drive it to success.
In conclusion:
Every team goes through these four stages on the way to becoming well-
synchronized high performing unit. Managers will do well to be mindful of
these stages and then take the steps required to guide the team to an
immediate next step till the team reaches the fourth. It is this that will help a
bunch of individuals to transform into a well-synchronized unit, performing at
peak levels.
Characteristics of High Performing Teams
• Sense of purpose
i. Setting Clear Expectations

• Open Communication
i. Regular conversations

• Trust and mutual respect

i. Sincerity, Integrity, Commitment, Reliability

• Shared Leadership
i. Situational Leadership
• Building on Differences
i. Strength based leadership

• Flexibility and Adaptability

i. Decision making

• Continuous Learning
i. Review Mechanism